Australia’s Treasurer has signaled a broad package of tax reforms ahead of the May federal budget, as the escalating conflict involving Iran reshapes the country’s economic outlook and intensifies pressure on households and businesses.

The government has identified the ongoing war in the Middle East as a defining factor for the upcoming budget, with sharp increases in global oil prices driving inflation higher and threatening to slow economic growth.

Treasury projections suggest inflation could climb to around five per cent, well above target levels, as fuel costs surge and supply chains face continued disruption.

In response, the Treasurer has indicated that significant tax changes will be considered as part of a wider effort to strengthen the economy, improve productivity, and ensure long-term fiscal sustainability.

The reform agenda is expected to include measures aimed at simplifying the tax system, encouraging investment, and enhancing fairness across generations.

Officials have acknowledged that the external shock caused by the conflict has accelerated the need for structural reform rather than delaying it.

The budget is being framed as an opportunity to rebuild fiscal buffers and position the economy to withstand prolonged volatility in energy markets and global trade.

At the same time, policymakers are weighing the impact of sustained high fuel prices, which have already driven up the cost of living and placed additional strain on industries reliant on transport and energy.

Treasury modelling indicates that prolonged elevated oil prices could reduce economic output over the coming years and keep inflation elevated for longer than previously expected.

The government has also ruled out introducing new income tax cuts in the budget, emphasizing fiscal discipline in the face of uncertainty.

Instead, the focus is shifting toward targeted reforms and spending controls designed to manage inflationary pressures while supporting growth.

Broader economic planning is being shaped by multiple scenarios tied to the duration of the conflict, with outcomes ranging from short-term disruption to a more sustained drag on national income and productivity.

Measures to secure fuel supply, support key industries, and stabilize domestic markets are being developed alongside the tax reform agenda.

The upcoming budget is expected to reflect these pressures, balancing immediate cost-of-living concerns with longer-term structural changes as Australia navigates one of the most complex global economic environments in recent years.